Gasoline Prices Continue Edging Up

As if the dwindling rig counts, record inventories and falling temperatures weren’t enough for the oil and gas industry, another complication is arising at the tail-end of the system. Strikes spearheaded by the United Steelworkers Union (USW) increased on February 23, 2015, and now consists of a total of 15 facilities, including 12 refineries. The affected regions represent approximately 20% of all United States refineries.

WTI Prices since 1983

WTI Prices since 1983

The strike is the largest refinery strike since 1980 and is entering its fourth week. USU is demanding higher safety measures and a wage hike as it continues its standoff with Royal Dutch Shell (ticker: RDS.B). “The potential for unplanned disruptions increases in our view,” says a note from Wells Fargo Securities. “The strike appears to be transitioning into a battle of wills; the union’s request for higher pay and a substantial expansion of opportunity for its members and the refining sector’s desire to maintain flexibility within its operations.”

Source: USW

Source: USW

The note explains the defining factors for both sides include, A) how long the union members are willing to sacrifice their pay checks and B) whether or not refineries can operate safely and efficiently without a chunk of its work force. A Southern California refinery operated by ExxonMobil (ticker: XOM) exploded last week and caused minor injuries, but the accident is not related with the current strike.

Wells Fargo further explains that strikes are not unusual and the union’s workers can be replaced by non-contract employees, but timing of this particular strike (considering planned turnarounds and the switch to summer-grade gas) may impact the market in the near-term.

Meanwhile, the USW has been posting news releases highlighting the risks of working at a refinery and blaming the “greedy oil industry” for the stoppage.  “This work stoppage is about onerous overtime, unsafe staffing levels, dangerous conditions the industry ignores, and the daily occurrences of fires, emissions, leaks and explosions that threaten local communities,” said Gary Beevers, the leader of the National Oil Bargaining Program. Another release details a handful of safety issues that have occurred since 2008.

Shell has not publicly commented on the matter. Media outlets have covered the strike and the season’s rising gasoline prices.

Unleaded Gas Prices since 2003

Unleaded Gas Prices since 2004

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